Question 1

Elimination entries appear only in the worksheets used to prepare the consolidated financial statements and not in the consolidated journal or the consolidated ledger.

Accepted Answer

A) True 
 B)False

Question 2

On November 19,2012,Lassen Company purchased 30,000 shares of JCN Corporation stock for $480,000,and 10,000 shares of Canoga Corporation stock for $250,000.Lassen's management intends to hold all 40,000 shares for a short period of time.On December 31,2012,the price of JCN's stock was $13 per share,and the price of the Canoga stock was $30 per share.Finally,on January 27,2013,Lassen sold all 10,000 shares of Canoga stock for $320,000.In the journal provided below,prepare Lassen's entries for November 19,December 31,and January 27.

Accepted Answer

The answer of On November 19,2012,Lassen Company purchased 30,000 shares...

Question 3

Only sales to outsiders and purchases from outsiders are reflected in a consolidated income statement because all intercompany transactions are eliminated in preparing the consolidated statement.

Accepted Answer

A) True 
 B)False

Question 4

Match each definition with the correct term below.
-Trading securities

Accepted Answer

A) Debt or equity securities bought and held principally for the purpose of being sold in the near term. 
B) The method of accounting for the ownership of more than 20 percent of another company's voting stock. 
C) Debt or equity securities that do not meet the criteria for either trading or held-to-maturity securities. 
D) A single set of financial statements for both the parent company and the subsidiary company. 
E) Companies that have expanded by establishing or buying foreign subsidiaries.
F)The method of recording available-for-sale securities that initially records securities at cost and thereafter periodically adjusts for changes in market value by using an allowance account.
G)The currency in which the consolidated financial statements are presented.
H)Debt securities that management intends to hold until their maturity date.
I)The investing company in a parent-subsidiary relationship.
J)Making use of inside information for personal gain. 
A) Debt or equity securities bought and held principally for the purpose of being sold in the near term. 
B) The method of accounting for the ownership of more than 20 percent of another company's voting stock. 
C) Debt or equity securities that do not meet the criteria for either trading or held-to-maturity securities. 
D) A single set of financial statements for both the parent company and the subsidiary company. 
E) Companies that have expanded by establishing or buying foreign subsidiaries.
F)The method of recording available-for-sale securities that initially records securities at cost and thereafter periodically adjusts for changes in market value by using an allowance account.
G)The currency in which the consolidated financial statements are presented.
H)Debt securities that management intends to hold until their maturity date.
I)The investing company in a parent-subsidiary relationship.
J)Making use of inside information for personal gain.

Question 5

An ownership interest of greater than 50 percent is required for an investor to have accounting control over an investee.

Accepted Answer

A) True 
 B)False

Question 6

The equity method usually is the most appropriate method for accounting for investments of more than a 20 percent interest of another company's stock.

Accepted Answer

A) True 
 B)False

Question 7

On January 1,2013,Walker Corporation has the following stockholders' equity accounts: Common Stock,$10 par $300,000
Retained Earnings 900,000
The fair market value of Walker's net identifiable assets on this date was equal to their book value.On January 1,2013,Rau Corporation acquired 100 percent of the common stock of Walker Corporation for $1,320,000 cash.The elimination entry necessary to prepare a consolidated balance sheet for this date is:

Accepted Answer

A)  Common Stock(Walker)300,000
Retained Earnings(Walker)900,000
Goodwill 120,000
Investment in Walker Corporation(Rau)1,320,000 
B)  Common Stock(Walker)300,000
Retained Earnings(Walker)900,000
Loss from Consolidation 120,000
Investment in Walker Corporation (Rau)1,320,000 
C)  Common Stock(Walker)300,000
Retained Earnings(Walker)900,000
Investment in Walker Corporation (Rau)1,200,000 
D)  Common Stock(Walker)300,000
Retained Earnings(Walker)900,000
Gain from Consolidation 120,000
Investment in Walker Corporation (Rau)1,320,000 
A)  Common Stock(Walker)300,000
Retained Earnings(Walker)900,000
Goodwill 120,000
Investment in Walker Corporation(Rau)1,320,000 
B)  Common Stock(Walker)300,000
Retained Earnings(Walker)900,000
Loss from Consolidation 120,000
Investment in Walker Corporation (Rau)1,320,000 
C)  Common Stock(Walker)300,000
Retained Earnings(Walker)900,000
Investment in Walker Corporation (Rau)1,200,000 
D)  Common Stock(Walker)300,000
Retained Earnings(Walker)900,000
Gain from Consolidation 120,000
Investment in Walker Corporation (Rau)1,320,000

Question 8

Insider trading is considered unethical,but it is not illegal in the United States.

Accepted Answer

A) True 
 B)False

Question 9

Significant influence is defined as owning what percent of the stock of another company?

Accepted Answer

A)  15 to 60 percent 
B)  More than 50 percent 
C)  20 to 50 percent 
D)  75 percent 
A)  15 to 60 percent 
B)  More than 50 percent 
C)  20 to 50 percent 
D)  75 percent

Question 10

Page Company and Orange Company have separate incomes of $280,000 and $480,000,respectively.They had intercompany purchases and sales of $80,000 and intercompany interest of $4,000.Consolidated net income is

Accepted Answer

A)  $844,000. 
B)  $760,000. 
C)  $676,000. 
D)  $284,000. 
A)  $844,000. 
B)  $760,000. 
C)  $676,000. 
D)  $284,000.

Question 11

When the cost-adjusted-to-market method is used to account for an investment in stock,dividends received are accounted for as an increase to dividend income.

Accepted Answer

A) True 
 B)False

Question 12

Stock categorized as trading securities is purchased for $144,000.At year end,when the market value of the stock is $126,000,the adjusting entry that would be recorded is:

Accepted Answer

A)  Allowance to Adjust Short-Term Investments to Market 18,000
Unrealized Loss on Investments 18,000 
B)  Unrealized Loss on Short-Term Investments 18,000
Allowance to Adjust Short-Term Investments to Market 18,000 
C)  Allowance to Adjust Short-Term Investments to Market 18,000
Short-Term Investments 18,000 
D)  Realized Loss on Investments 18,000
Short-Term Investments 18,000 
A)  Allowance to Adjust Short-Term Investments to Market 18,000
Unrealized Loss on Investments 18,000 
B)  Unrealized Loss on Short-Term Investments 18,000
Allowance to Adjust Short-Term Investments to Market 18,000 
C)  Allowance to Adjust Short-Term Investments to Market 18,000
Short-Term Investments 18,000 
D)  Realized Loss on Investments 18,000
Short-Term Investments 18,000

Question 13

Summers Corporation purchased 15,000 shares of Ritchie Corporation common stock for $60 per share on January 2,2012.Ritchie Corporation reported net income of $1,500,000 for 2012 and paid dividends of $300,000 during 2012.Ritchie has a total of 50,000 shares of common stock outstanding.The entry that would be recorded to recognize the income is:

Accepted Answer

A)  Cash 90,000
Dividend Income 90,000 
B)  Investment in Ritchie Corporation 450,000
Income,Ritchie Corporation Investment 450,000 
C)  Dividend Income 450,000
Cash 450,000 
D)  Investment in Ritchie Corporation 450,000
Cash 450,000 
A)  Cash 90,000
Dividend Income 90,000 
B)  Investment in Ritchie Corporation 450,000
Income,Ritchie Corporation Investment 450,000 
C)  Dividend Income 450,000
Cash 450,000 
D)  Investment in Ritchie Corporation 450,000
Cash 450,000

Question 14

Match each definition with the correct term below.
-Parent company

Accepted Answer

A) Debt or equity securities bought and held principally for the purpose of being sold in the near term. 
B) The method of accounting for the ownership of more than 20 percent of another company's voting stock. 
C) Debt or equity securities that do not meet the criteria for either trading or held-to-maturity securities. 
D) A single set of financial statements for both the parent company and the subsidiary company. 
E) Companies that have expanded by establishing or buying foreign subsidiaries.
F)The method of recording available-for-sale securities that initially records securities at cost and thereafter periodically adjusts for changes in market value by using an allowance account.
G)The currency in which the consolidated financial statements are presented.
H)Debt securities that management intends to hold until their maturity date.
I)The investing company in a parent-subsidiary relationship.
J)Making use of inside information for personal gain. 
A) Debt or equity securities bought and held principally for the purpose of being sold in the near term. 
B) The method of accounting for the ownership of more than 20 percent of another company's voting stock. 
C) Debt or equity securities that do not meet the criteria for either trading or held-to-maturity securities. 
D) A single set of financial statements for both the parent company and the subsidiary company. 
E) Companies that have expanded by establishing or buying foreign subsidiaries.
F)The method of recording available-for-sale securities that initially records securities at cost and thereafter periodically adjusts for changes in market value by using an allowance account.
G)The currency in which the consolidated financial statements are presented.
H)Debt securities that management intends to hold until their maturity date.
I)The investing company in a parent-subsidiary relationship.
J)Making use of inside information for personal gain.

Question 15

At any given balance sheet date,the balance of the Realized Gain on Long-Term Investments account is equal in amount to the balance of the Allowance to Adjust Long-Term Investments to Market account.

Accepted Answer

A) True 
 B)False

Question 16

Rapp Corporation has invested in the stock of two other corporations,Hart Corporation and Hilker Corporation.Rapp does not own a controlling interest or exercise significant influence over either corporation.Rapp's accountant is preparing financial statements and has compiled the following information: $\begin{array}{|cccc|}
\hline \text { Stock name } & \text { No. of shares } & \text { Cost } & \text { Market } \
\text { Hart } & 1,000 & \$ 23,000 & \$ 24,000 \
\text { Hilker } & 500 & \$ 27,500 & \$ 25,500 \
\hline
\end{array}$ What should be the balance in the Allowance to Adjust Long-Term Investments to Market account,based on the above information?

Accepted Answer

A)  $1,000 credit 
B)  $2,000 debit 
C)  $2,000 credit 
D)  $1,000 debit 
A)  $1,000 credit 
B)  $2,000 debit 
C)  $2,000 credit 
D)  $1,000 debit

Question 17

The following transactions and information pertain to Yates Corporation for 2012 and 2013.
   Prepare entries in journal form,without explanations,to record the above.Yates's accounting year ends December 31.

Accepted Answer

The answer of The following transactions and information pertain to...

Question 18

The elimination of the investment in the subsidiary company is made against the investment account,common stock,and retained earnings of the subsidiary company.

Accepted Answer

A) True 
 B)False

Question 19

On November 28,2012,Barbour Company purchased 20,000 shares of Cabell Corporation stock for $720,000.Barbour's management intends to hold the shares for a short period of time.On December 31,2012,the price of Cabell stock was $30 per share.Finally,on January 19,2013,Barbour sells all 20,000 shares for $750,000.In the journal provided below,prepare Barbour's entries for November 28,December 31,and January 19.(Omit explanations).

Accepted Answer

The answer of On November 28,2012,Barbour Company purchased 20,000 shares...

Question 20

Gains and losses on the sale of investments appear as adjustments within the financing activities section of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Elimination entries appear only in the worksheets used to prepare the consolidated financial statements and not in the consolidated journal or the consolidated ledger.

Only sales to outsiders and purchases from outsiders are reflected in a consolidated income statement because all intercompany transactions are eliminated in preparing the consolidated statement.

Match each definition with the correct term below. -Trading securities

An ownership interest of greater than 50 percent is required for an investor to have accounting control over an investee.

The equity method usually is the most appropriate method for accounting for investments of more than a 20 percent interest of another company's stock.

Insider trading is considered unethical,but it is not illegal in the United States.

Significant influence is defined as owning what percent of the stock of another company?

Page Company and Orange Company have separate incomes of $280,000 and $480,000,respectively.They had intercompany purchases and sales of $80,000 and intercompany interest of $4,000.Consolidated net income is

When the cost-adjusted-to-market method is used to account for an investment in stock,dividends received are accounted for as an increase to dividend income.

Stock categorized as trading securities is purchased for $144,000.At year end,when the market value of the stock is $126,000,the adjusting entry that would be recorded is:

Match each definition with the correct term below. -Parent company

At any given balance sheet date,the balance of the Realized Gain on Long-Term Investments account is equal in amount to the balance of the Allowance to Adjust Long-Term Investments to Market account.

The following transactions and information pertain to Yates Corporation for 2012 and 2013. Prepare entries in journal form,without explanations,to record the above.Yates's accounting year ends December 31.

The elimination of the investment in the subsidiary company is made against the investment account,common stock,and retained earnings of the subsidiary company.

Gains and losses on the sale of investments appear as adjustments within the financing activities section of the statement of cash flows.

Uses of Accounting Information and the Financial Statements

Analyzing Business Transactions

Measuring Business Income

Supplement - Closing Entries and the Work Sheet

Financial Reporting and Analysis

The Operating Cycle and Merchandising Operations

Inventories

Cash and Receivables

Current Liabilities and Fair Value Accounting

Long Term Assets

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Performance Measurement

Filters

Exam 15: Investments

Elimination entries appear only in the worksheets used to prepare the consolidated financial statements and not in the consolidated journal or the consolidated ledger.

Only sales to outsiders and purchases from outsiders are reflected in a consolidated income statement because all intercompany transactions are eliminated in preparing the consolidated statement.

Match each definition with the correct term below. -Trading securities

An ownership interest of greater than 50 percent is required for an investor to have accounting control over an investee.

The equity method usually is the most appropriate method for accounting for investments of more than a 20 percent interest of another company's stock.

Insider trading is considered unethical,but it is not illegal in the United States.

Significant influence is defined as owning what percent of the stock of another company?

Page Company and Orange Company have separate incomes of $280,000 and $480,000,respectively.They had intercompany purchases and sales of $80,000 and intercompany interest of $4,000.Consolidated net income is

When the cost-adjusted-to-market method is used to account for an investment in stock,dividends received are accounted for as an increase to dividend income.

Stock categorized as trading securities is purchased for $144,000.At year end,when the market value of the stock is $126,000,the adjusting entry that would be recorded is:

Match each definition with the correct term below. -Parent company

At any given balance sheet date,the balance of the Realized Gain on Long-Term Investments account is equal in amount to the balance of the Allowance to Adjust Long-Term Investments to Market account.

The following transactions and information pertain to Yates Corporation for 2012 and 2013. Prepare entries in journal form,without explanations,to record the above.Yates's accounting year ends December 31.

The elimination of the investment in the subsidiary company is made against the investment account,common stock,and retained earnings of the subsidiary company.

Gains and losses on the sale of investments appear as adjustments within the financing activities section of the statement of cash flows.

Uses of Accounting Information and the Financial Statements

Analyzing Business Transactions

Measuring Business Income

Supplement - Closing Entries and the Work Sheet

Financial Reporting and Analysis

The Operating Cycle and Merchandising Operations

Inventories

Cash and Receivables

Current Liabilities and Fair Value Accounting

Long Term Assets

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Performance Measurement

Filters